What Direction Is the Boutique Hotel World Headed?

A lot of factors go into developing a successful boutique hotel, from location and feasibility to design and operations. At the Boutique Hotel 2014 Investment Conference presented by the Boutique & Lifestyle Lodging Association, a panel of experts discussed the “Boutique Hotel: Start to Finish” at the New York Institute of Technology Auditorium June 4.

The sector started out in the global capitals—New York, Paris, London—but has evolved significantly since, with boutique hotels popping up these days in such markets as Minneapolis, Milwaukee, Pittsburgh, and Chicago.

“I think what you’re seeing now is really an awakening of other cities where there is wealth, social engagement, creativity, and an audience that travels to and is indigenous to the local population where boutique and lifestyle hotels are really emerging,” said Jason Pomeranc, founder of Sixty Hotels. “That’s happening everywhere from secondary cities around global capitals.”

Mark Gordon, managing partner of Tribeca Associates, a New York-based real estate firm that is currently developing the Baccarat Hotel & Residences New York off of Fifth Avenue on 53rd Street, says developers and hotel owners now have more flexibility in terms of location. “It’s really more focused on quality of building, design, and service,” Gordon says.

When Ian Schrager opened the Hudson New York hotel on 58th in Manhattan in 2000, people thought he had gone crazy, Gordon recalls. “But really the market has evolved around him, so it was a very insightful location in retrospect. If the hotel is great, it becomes a destination hotel and people will travel to it.”

At only about 2 percent of overall hotel room inventory, the boutique sector has a lot of room for growth, Pomeranc adds. Just as small fashion houses set a precedent and larger companies then create mass production of the latest styles and trends, Pomeranc says the larger chains are learning from smaller ateliers. “It’s happening not only on the luxury sector, like where Edition Hotels is, but you’re going to see it throughout. They are reinterpreting what the standard is.”

As most recently seen with Hilton’s launch of Curio, a collection of distinctive four- to five-star hotels, big brands continue to encroach on the boutique and lifestyle space. “What we’re seeing is a melding between the brands and the perception of boutique independents,” says Dan Lesser, president and CEO of LW Hospitality Advisors. “At the end of day, it’s all about making money, and I believe location and price are really the drivers. Really at every price point, everything is turning hip and boutique.”

The term boutique might even become obsolete soon as segmentation blurs more and more, Pomeranc says. “Hotel culture is changing. It’s becoming more design savvy and more progressive in their F&B engagement thinking, therefore the norm is going to be different.”

When boutique hotels first came on the scene, they were positioned at a lower price point and geared toward a younger, more alternative and creative type of clientele. “The idea of cheaper and value and appealing to what today would be the millennials is really the direction the boutique world is going, so that’s where the new innovation is going to be,” Pomeranc says.

When the Gettys Group design firm is enlisted to work on a boutique hotel project, the process starts with creating a story and an authentic experience for guests, says Principal Karrie Drinkhahn. For example, at the Godfrey Hotel in Chicago, the firm wanted to mirror the surroundings of the River North neighborhood’s gallery art scene. “For us, it doesn’t start with the palette, it starts with creating that experience and what are people coming to expect,” she says. “We’re not trying to be all things to all people at the properties we’re designing, so we try to focus on the demographics and the psychographics.”

The expectation of service has also changed. Millennials want great WiFi and the ability to connect and be social—they don’t need turndown service, chocolates by the pillow, or 24/7 room service. They’d rather have a gourmet grab-and-go, a great bar, and affordably priced restaurant where they can congregate and meet in an informal setting, Pomeranc says. In terms of guestroom design, millennials don’t need a large space. “They want innovative design, they want smart design, and they want something that appeals to their sensibilities, but it doesn’t have to be what we perceive as the 22-by-14 cube,” he explains. “That’s where the real interesting direction is going to go.”